The Panama Papers – a Symbol of True Digital Disruption

The word disruption is used so very often it has almost lost its power. But there are times the world is genuinely disrupted, and on a global scale.

The current Panama Papers’ scandal is a symptom of one such disruption. It is extraordinary in its scale and global reach. It demonstrates the insecurities of our digital society, the almost-death of privacy, and indeed issues with the way our connected world is governed.

A Prime Minister Resigns

At the time of writing, the scandal has claimed its first major victim with the resignation of Iceland’s embattled prime minister, Sigmundur Davíð Gunnlaugsson. The UK Guardian said:

“A mass protest planned in Reykjavik later … turned to celebration as Icelanders vented their anger at the outgoing prime minister following revelations that he had once owned – and his wife still owns – a secret offshore investment company with multimillion-pound claims on Iceland’s failed banks.”

This is an event likely to lead to new elections that may change the face of Icelandic politics.

Reykjavík

Global Impact

Other threads of the emerging story link the papers to Chinese and Russian leadership, FIFA’s new president Gianni Infantino, and the father of the British Prime Minister David Cameron. Another connects billions of dollars of foreign funds to London property, exacerbating concerns about affordability for the young. There are implications and investigations across Africa, Austria, France, Italy, Australia and New Zealand.

President Obama made the following observation, highlighting some of the systemic issues the scandal illuminates:

“We’ve had another reminder in this big dump of data coming out of Panama that tax avoidance is a big, global problem. It’s not unique to other countries because, frankly, there are folks here in America who are taking advantage of the same stuff. A lot of it is legal, but that’s exactly the problem. It’s not that they’re breaking the laws, it’s that the laws are so poorly designed that they allow people, if they’ve got enough lawyers and enough accountants, to wiggle out of responsibilities that ordinary citizens are having to abide by.”

The Source

The Panama Papers consist of 11.5m documents created across a period of four decades that describe the details of 214,000 entities. These were leaked from a Panamanian law firm called Mossack Fonseca, passed to German newspaper Sueddeutsche Zeitung and then shared with the International Consortium of Investigative Journalists (ICIJ). The analysis has been undertaken by journalists from 107 media organizations in 76 countries – connecting the BBC, the Guardian, the Washington Post, El Pais and many more giants of media. The scale of the leak is breathtakingly gigantic, consisting of 2,600 Gb of data compared with around 1.7 Gb for the 2010 Wikileaks event.

Observations

How this particular saga will play out is unpredictable. The sheer scale of the data released means we are in for turbulence in certain parts of the world, and privileged parts at that. It is a journalist’s dream. But there are some intriguing general themes here that are already visible, and of relevance to many enterprises.

Digital Insecurity, Digital Trust

Digital tech has made the world insecure in an utterly fundamental sense. In the case of the Panama Papers, a very bright light has been shone into dark places. But of course, data leaks are not always for noble purpose.

Data for every member of a country’s population can be easily held on a small single device. Another recent event was the apparent illegal release of data for a huge section of the Turkish population. Information including names, birth dates, national id numbers, addresses, and parent names were posted online in a downloadable 6.6 Gb file. This looks like one of the biggest public leaks of personal data ever and one that puts maybe the majority of the country’s population at risk of identity theft.

Another example: a group of cyber-fraudsters researched the the internal processes of Bangladesh’s central bank, then – using that information – posed as officials to request a series of transfers to illicit accounts which approached $1 billion in value. The scale of the transactions, coupled with a spelling mistake in a name noticed by Deutsche Bank, halted the fraud but not before around $80m was lost – essentially one of the biggest known bank robberies in history

Technology is the friend and enabler of the committed politically-driven leaker or equally committed cyber-criminal. For better or for worse, it is possible for an individual or small group to shake the foundations of a business, of a nation and of a global system.

The implication of this for enterprises and individuals is profound in the long-term. It will be better to start in the right place, and operate with public values and transparency as far as humanly possible. Where security and privacy do matter – few would want to be transparent about their credit card numbers for example – then the creation of true digital trust, using technologies like block-chain, becomes one of the key challenges of future business. And every organization will need to treat transparency, values and security as connected C-level issues.

Digital trust will be as important to modern capitalism as the invention of double-entry book-keeping was at its birth.

The High Velocity of Crisis

The velocity of the news cycle becomes ever more gruelling. The Icelandic and UK governments are facing major crises within hours and days of disclosures of overwhelming volume. In the specific case of the Panama Papers, corporates like HSBC are also caught in the global tsunami. Other data leaks have caused high profile issues for a long-list of other companies: Sony, Target, JP Morgan Chase, T-Mobile, Talk-Talk and many more.

In the end, responses need to fast, clear and rooted in truth, solid values, strong technical action and PR expertise to be seen as credible. Leadership everywhere will need to combine integrity, rigour and agility in the way they prepare for and deal with issues.

The Issues of Governance in a Part-Globalised World

There are real tensions in our systems of business and political governance. The global elite and global businesses are ever more connected. Conversely, Tax systems are balanced between complex global treaties and the historic centres of gravity in national tax regimes. Some will seek to hide their wealth through the complex system this creates. On the other hand, many expat workers will grind their teeth at the frustrating processes required to avoid double taxation. Within major corporates, tax is seen as a global issue where networks are designed – generally perfectly legally – to optimize profit. To do otherwise would be less than competitive.

But most politics is still national. In the West, there is growing democratic frustration at globalization on both left and right. (Although ironically the Panama Papers are being analyzed by a global consortium of journalists.) There is a long road ahead to balance the powers of global political and commercial networks against the needs of citizens and democratic consensus. Some would say one of our most urgent tasks is balancing the perceived privileges of the elite against a growing desire for fairness.

Globalization has driven huge benefits, and the position of the average human has improved mightily in the last half-century. We talk about this less often than we should. But there remains a lot to be done, and the leaders of any modern global enterprise need to be deeply aware of the local demands and sensitivities of their customers and stakeholders. Above, political leaders have a field of nettles to grasp to ensure a more efficient and equitable global trading system.

Conclusion

What we are seeing are the growing pains of what has been called “The Second Machine” age. Digital Technology has become powerful, bringing huge benefits to consumers and producers in both the developed and developing worlds. It also brings people together in new and intensely creative ways.

Simultaneously, it creates wholly new challenges around trust, security and the why the world operates. It enables light to be shone in places long used to the dark. In the end, enterprises and leaders that focus on values, integrity, organizational resilience and rigour will thrive.

Keith Haviland is a business and technology leader, with a special focus on how to combine big vision and practical execution at the very largest scale, and how new technologies will reshape tech services. He is a former Partner and Global Senior Managing Director at Accenture, and founder of Accenture’s Global Delivery Network. Published author and active film producer, including being Co-Executive Producer on “The Last Man on the Moon”. Advisor/investor for web and cloud-based start-ups.